Behind on Mortgage Payments: What You Can Do

Mortgage payments can be difficult for anyone to manage, especially in the modern, turbulent economy. If you’ve fallen behind on mortgage payments or have missed payments altogether, don’t automatically assume you have to give up your home. There are many things you can do to stay a homeowner and escape this financially difficult spot.

Refinance Your Loan

For starters, you can always try to refinance your loan. This involves working with your current or a new mortgage lender to try and take out a new mortgage on your property with a lower monthly payment. This option is usually only ideal if you have 20% equity in your home already, which allows you to avoid private mortgage insurance on the new loan agreement.

It can take roughly one to two months to complete, and it is important to be aware that the lender will charge closing and origination fees. Refinancing your loan allows you to work with the same or a different loan servicer and get away from financial hardship.

Ask for Forbearance

If you’re consistently dealing with late payments or can’t make any mortgage payments, consider asking your lender for a forbearance instead of a refinance. Depending on the loan type and request status, a mortgage forbearance can reduce or suspend your mortgage payments for up to 18 months.

A forbearance period can give you some financial wiggle room, but remember that you must repay any past-due amount that you owe the lender once the forbearance agreement reaches its term. Traditionally, the lender will either require a repayment plan or a lump sum payment, so it is important to read the contract and understand the stipulations before moving forward with the arrangement. This is best if you are only temporarily unable to make your mortgage payments.

Try a Mortgage Modification

Alternatively, consider a mortgage modification. With this strategy, your lender will permanently adjust the terms of your loan to ensure you can make more manageable monthly payments. Note this may extend the length or term of your loan by several months or even years, so you’ll pay more in interest in the long run. But this can still be a stellar option compared to losing your home outright.

A loan modification might be ideal for borrowers who have missed several payments due to unexpected financial hardship, like losing their job because of the coronavirus pandemic or a medical issue. If you are having difficulty because of your financial situation, a loan modification may enable you to permanently alter your monthly mortgage payments and avoid late fees in the future.

Sell Your Home

Naturally, you can always opt to sell your home if you know you won’t be able to make mortgage payments consistently in the future. This could allow you to escape loan terms that have a high interest rate, while also potentially pocketing some cash you can use as a down payment for a new house.

However, if you miss mortgage payments during the sale process, you might find that your credit score plummets. That can make it hard to get approved for a new mortgage loan in the future.

Rent Your Home

If you want to retain homeownership and make passive income, you can move out and rent your property to someone else. That can be an excellent option if you have somewhere else to live and your local real estate market is prime for renting.

Renting your home, however, requires you to fix it up and make sure it’s an attractive property many people want to live in. Therefore, this is an appropriate strategy only if you have the experience and dedication needed to:

  • Build up your property
  • Maintain it regularly
  • Look for tenants
  • Market your property
  • Interview and work with tenants

Renting your home is equivalent to a full-time job, so keep that in mind!

Offer a Short Sale

With a short sale, your lender allows you to sell your home very quickly and accepts whatever money you can make from the transaction, even if it’s less than you owe on your mortgage. Some lenders will accept the amount and consider the debt settled, others will require you to still make payments on the remainder of the debt owed. It's important to note that just because the home is sold, does not mean the balance is cleared.

Short sales are contingent on lenders accepting the offer, and they still negatively impact your credit report. That said, they do much less damage compared to a foreclosure.

Depending on what your loan servicer prefers, this could be a good way to avoid the foreclosure process while preventing too much damage to your credit in the eyes of the credit bureaus.

Offer a Deed in Lieu of Foreclosure

If you offer your lender a deed in lieu of foreclosure, you offer to vacate the home and give the mortgage lender total ownership of the property in exchange for you being released from any debt obligations.

Many lenders will accept a deed in lieu of foreclosure simply to get the process complete. They will then take the property and sell it at auction to recoup some of their losses.

Your mortgage servicer has to accept a deed in lieu of foreclosure; you can’t offer it and assume that they will always allow you to avoid foreclosure in this way. A deed in lieu of foreclosure also negatively impacts your credit report for a certain period of time, making it hard for you to qualify for HUD-approved housing loans.

Co-Own With Balance

If none of the above options seem attractive, consider contacting a co-owner like Balance. With Balance, you can participate in a home equity investment. We'll pay off your remaining mortgage balance, then take out an equity share investment in your property.

In exchange, you get to stay in your home, and you only have to make one simplified monthly payment to us to cover your occupancy and share of costs, like taxes and insurance. All the while, you'll receive a lump sum of cash for the equity you've built up in your property to pay down credit card debt or other loan balances and improve your credit score.

We’re committed to helping create a path for homeowners to improve their credit and finances so they can successfully buy us out in the future — with Balance, you can refinance into a traditional mortgage at any time.

Contact Balance Today

At Balance, we offer home equity investments that allow homeowners to receive lump sum payments for their equity, then retain the right to buy us out later on. In this way, you can get the money you need to pay down your debt and avoid foreclosure all at the same time. Contact Balance today to learn more!


Understanding your home's equity | Freddie Mac

Learn about forbearance | Consumer Financial Protection Bureau

What is a Short Sale on a House? Process, Alternatives, and Mistakes to Avoid | Investopedia

What is a deed-in-lieu of foreclosure? | Consumer Financial Protection Bureau